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Business News › News › Economy › Indicators › It's not India's decade, it's India's century, says McKinsey's Bob Sternfels

It's not India's decade, it's India's century, says

McKinsey's Bob Sternfels
14

ET Bureau Last Updated: Sep 02, 2022, 11:33 AM IST SHARE FONT SIZE SAVE PRINT COMMENT

Synopsis
The firm's 13th global leader added that it will not only
be India's decade, but India's century, with all key
elements in place - a large working population,
multinational companies reimagining global supply
chains, and a country leapfrogging at digital scale-to
achieve something special not just for the Indian Replay
economy, but potentially for the world.

India will be the world's future

talent factory as it will have
20% of the globe's working Most Popular Stories
population by 2047, said Bob
1. Vedanta to set up iPhone
manufacturing hub in
Sternfels, CEO, McKinsey & Co. Maharashtra: Report

The Irm's 13th global leader

added that it will not only be 2. Byju’s losses swell to Rs 4,588
crore in delayed FY21 results
India's decade, but India's century, with all key elements in
place - a large working population, multinational companies
reimagining global supply chains, and a country leapfrogging 3. Anil Agarwal on why Vedanta
picked Gujarat over
Maharashtra for its chip
at digital scale-to achieve something special not just for the plant
Indian economy, but potentially for the world.
4. Infosys warns employees on
moonlighting, says could
lead to termination
McKinsey plans a "disproportionate commitment" to India
and that's why its global board will be coming to the country
5. Chakri Lokapriya’s 6 top bets
in December, Sternfels said. The Irm has 5,000 people in in specialty chemicals and
cement space
India, a number he wants to double to 10,000. In an exclusive
interview with ET's Vinod Mahanta, Sternfels talks about the
India opportunity, the recent scandals that have hit McKinsey,
the state of the global economy, in&ation woes and the threat
of deglobalisation. Edited excerpts:

The Indian economy seems to have weathered the Are you immigration ready?
AD Y Axis KNOW MORE
pandemic fairly well, despite hitting a few rough patches in
the last two years. How do you see India's growth story
unfolding in the conteAt of a deceleration in global TOP TRENDING NEWS

s economic activity? Covid News LIVE Updates Church Bells NPS Rent Agreement PM Kisan IPhone 14 Price September 2022 Bank Holiday

ce DDA Hosing Scheme Bernard Shaw News Gold Rate Today Economy News Breaking News

Many people have said that it's India’s decade. I actually think
it's India’s century when we look at some of the raw Popular in Economy

ingredients here. India is the future talent factory for the 1. Why are you hesitating to get
into manufacturing, FM
world. By 2047, India would have 20% of the world’s working Nirmala Sitharaman asks
India Inc
population. And with supply chains being reimagined, it has
massive potential for India across all aspects of 2. India's national logistics
policy set for release on

manufacturing. The third is digitisation. India has leapfrogged September 17: Some key
details
on the digital scale. All those are the raw materials to do
something special for not only the Indian economy but 3. Depleting reserves spell risks
for emerging Asian
currencies
potentially for the world.

4. Surge in services demand

So does that optimism translate into more investment in helps steady India’s economy
in August
McKinsey India?
I’m bringing our global board here in December because we
5. Our lipstick obsession says a
lot about the economy
are going to make a disproportionate commitment to India.
We are about 5,000 people in India now—both in India
practice and global centres—and it’s my aspiration to get to
10,000. We are about 40% women today, and I want that to be
50%. We turn 100 in 2026, so my question is, what can we be
in 2026 in India.

MProfit | India's #1 portfolio tracker |

How has the McKinsey India practice performed during the Import data from 700+ brokers

pandemic years? MProfit AD KNOW MORE

Our growth in India has consistently been in double digits and

is underpinned by these great client references. Our people Most Popular Opinion
processes are global and when we look at the performance of 1. When India lost its semiconductors chips
our Indian partners globally. They are disproportionately
successful. I think that there’s an opportunity to be not just 2. View: Chips are up for India
By Arun Mampazhy

India’s decade but India’s century and in the process of doing

so, how does it become a lighthouse for the rest of the world 3. Room for smaller interest rate hikes
for McKinsey? I think client relationships lead in many ways
in terms of the trust that we have got. At the same time, you Latest News

will hear from me frequently that I'm not happy with where 1 . Taliban deny JeM chief Masood Azhar in
Afghanistan, say Pakistan claim could hit
we are, and I don't believe those two things are mutually ties

exclusive. I think you can be leading and still not be happy.

2 . UP dalit sisters' rape-murder: Police rule out
And what I'm not happy with is that I'm not happy with the abduction; six accused in custody

speed. I want us to move faster. The idea of doubling our

3 . 7 questions to ask before you buy that house
innovation is critical to staying ahead of our clients.

In the last few years, McKinsey has faced a corruption

scandal in South Africa, been criticised for its work with
regimes like Saudi Arabia, a few partners have been
charged with insider trading, and then there’s a lawsuit
related to aggressively promoting opioids. Has success led
to a case of greed over principles?
I don't think so. The world has changed. The world has become
a much more scrutinous place. The work we have done has
changed. I have talked to our partners about the need to evolve
on two dimensions and learning how to separate these two
dimensions. We need to learn to be humble and courageous at
the same time. On the humble side, we need to be able to
identify quickly when we have made mistakes, Igure out how
to Ix them, and make sure they never happen again. For
example, in South Africa, we have now learned much better
about contracting and how you partner. I put opioids in that
category. Although what we did wasn’t illegal, we didn’t take
the broader context into account. We also need to be
courageous in places where we disagree with the scrutiny and
our skin is thick enough to keep going. Like the work we do in
Saudi, where we work on health, education, housing, and we
are helping the lives of Saudi citizens. We stand by that work.
When we were criticised for our work on hard to abate sectors,
I put an op-e in the WSJ that said we work with them because
that’s where the emissions are. We are really committed to
sustainability.

The global economy, which is reeling from the pandemic,

stubborn inJation and Russia’s invasion of Ukraine, faces
an increasingly gloomy and uncertain outlook. Are we on
the edge of a global recession?
It’s easy to list all the things and even more, like the increasing
socio-economic divide in almost every country in the world
and increasing labour shortages. But there are some things
that make these times unique. Tom Barkin, the president of
the Richmond Fed and a McKinsey alum, told me, "Bob,
remember, it's hard to have a recession if you have zero
structural unemployment." We have zero structural
unemployment in the US and in most parts of Western
Europe. So you are running at a very low unemployment rate.
That may be unlike the last two periods of disruption—the
global Inancial crisis and the dotcom bust. Equally, I think
you have started to see some of those inbationary signs start to
taper oc. Oil prices have started to fall below $100 a barrel.
Also, in certain supply chains, you are seeing a massive inbux
of secondary sales in the US and Europe. So goods that were
once going through primary channels are now going through
discount channels because of supply chains catching up. So I
would say the signals are mixed.

And what are the CEOs telling you about the state of their
companies?
One of the things that I did over the past year was get out and
talk to clients, and I have talked to over 500 of our CEOs in the
last year. CEOs now want to play ocence and defence at the
same time. So defensive measures... shore up the balance
sheet, increase eciciency, and ensure the company can
withstand shocks. They are also saying, my balance sheet is
healthier than it was in either of those downturns. And I want
to actually take two or three big strategic bets so that I can
come out on top. In the end, we may come out better than
what some of those signals are saying, and particularly in
India, I think there's an opportunity for India to come out in a
disproportionate position ahead.

In your opinion, is inJation transitory or here to stay?

I don’t have a crystal ball on inbation, but I actually think that
you could see a world that is more transitory if these combined
forces all play out. Combined forces of prudent interest rate
policy, application of technology, which actually helps solve
the supply chain side faster, and a pragmatic approach to solve
some of these tough choices like energy resilience, where we
adopt more brown to green.

Do you think the impact on global trade due to geopolitical

fragmentation will be temporary?
I think this is one of the existential questions of our time. The
order we all grew up in is coming to an end. And what a lot of
people are saying is that what's going to give way is that it's
going to go to deglobalisation. And I think that would be a big
mistake. When you look at the costs, the World Trade
Organization just came out with a report that said if the US
and China decouple, in a very conservative calculation, 5% of
global GDP gets wiped away. And it disproportionately
impacts the bottom 40% of society. So there's a massive cost
associated with this. I think, quite frankly, it's up to business
leaders to start to articulate what can follow globalisation that
doesn't default to deglobalisation.

The problems that we all want to tackle—growth, climate,

talent—don't stop and start with borders. It's hard to solve
these within the boundaries and borders of individual states
as opposed to some form of integrated solutions.

The second is this notion of resilience. I think as we start to

think about resilience, we may deIne interdependence, in a
dicerent way. It's still interconnected, but it may be a much
more resilient, interconnected model. And from McKinsey's
point of view, we stand for interconnectedness; it's core to the
belief system that we've got.

Are you getting more questions about rising geopolitical

risks after the Ukraine-Russia conJict and the China-
Taiwan tension?
Very much so. How do you stress test your organisation to see
how resilient it is to these types of shocks? And moving away
from risk management to resilience muscle building is one of
the big conversations that we are having with all CEOs.

You have kickstarted a set of changes in McKinsey. How is

India practice doing on that front?
I’m very pleased with India. We're leading the way in what I'm
trying to do in the world overall. India's a microcosm. Whether
it's diversifying talent, increasing our gender diversity, or
increasing the number of sources we hire from. McKinsey has
historically been thought of as being elite. But I want it to be
distinctive, not elite. Elite implies exclusive, a certain number
of backgrounds, a certain number of proIles. Every year, we
receive a million applications for 10,000 positions, but they
have historically come from less than 500 sources.

I want that to be 5000 sources. India is on that path. We going

to measure what kind of impact McKinsey is having. So what I
want to measure us against is that in an economy, are we
making a dicerence to what I'm calling sustainable, inclusive
growth? Is the economy that we're in growing because of the
work that we're doing? Are the clients that we work with
upskilling and adding employment or are they taking away
employment? Are our clients hitting their climate goals? India
is on that path too.

Last year, our clients helped drive 20% of the world's GDP
growth. They added a million net jobs, so they added
employment and they moved seven times faster on their
climate goals than the rest of the global 1000.

Is the Trm’s rapid global eApansion to be blamed for a

perceived drop in standards?
No. I obsess over maintaining our culture. We're about to turn
100. The conversation that I have engaged with all of our
colleagues is how do we design a Irm that's going to last
another 100 years? That’s our obligation: our second century.
And that has a mix in my mind of understanding how we got
here. And in my mind, that starts with preserving our values
and leading the way on this notion of professionalism.

I want to continue to invest heavily in things like: what does

individual accountability mean? What does compliance
mean? We're actually going to drive compliance the way that a
publicly traded global Irm does. That's new for any
professional service Irm. Does that mean we should not
innovate? Absolutely not. And I do back this notion of speed. I
think we need to go faster to stay ahead of our clients to have
the impact that we want to have. But I think you can be a safe
and fast Irm.

Are you also evaluating how McKinsey engages with clients

in terms of pricing?
I want to change the model, the idea of partnering with our
clients versus serving them. And that means moving from
being a cost to being a co-investor. I want to co-invest with our
clients on their impact journeys. What that means is that we
will both put skin in the game, we will both take risks, we will
have outcome-based journeys versus pure expense… that starts
to change the cost equation.

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